Crypto gets taxed in Nigeria as KuCoin follows suit after Binance standoff

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Nigeria’s crypto sector is facing a wave of taxation, with KuCoin, a major cryptocurrency exchange, announcing a 7.5% Value-Added Tax (VAT) on transaction fees starting July 8th, 2024. This follows recent friction between the Nigerian government and Binance, another leading exchange, over alleged unpaid taxes.

KuCoin, a cryptocurrency exchange operating in Nigeria, announced on Wednesday that starting July 8, 2024, it would begin charging users a 7.5 per cent Value-Added Tax on transaction fees.

KuCoin disclosed this update in a statement posted on its official X account. The new policy specifies that the 7.5 per cent VAT will be applied to the transaction fee, not the total transaction amount.

For instance, if a user buys $1,000 worth of Bitcoin (BTC) with a 0.1 per cent fee rate, the transaction fee would be $1. The VAT would be 7.5 per cent of the fee, which is $0.075, resulting in a net transaction amount of $998.925.

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“We are writing to inform you of an important regulatory update that impacts our users in the Republic of Nigeria. Starting from July 8, 2024, we will begin collecting a Value-Added Tax (VAT) at a rate of 7.5 per cent on transaction fees in each trade for users whose KYC information is registered in Nigeria,” the exchange said.

This move by KuCoin is seen as an attempt to comply with regulations and avoid a similar situation to Binance. The Nigerian Federal Inland Revenue Service (FIRS) has been cracking down on the crypto industry, aiming to capture revenue from the country’s booming peer-to-peer (P2P) market, estimated at over $57 billion in transactions between July 2022 and June 2023.

Key Points to Consider:

• Impact on Users: The VAT will be applied only to transaction fees, not the total transaction amount, minimizing direct impact on users. However, it could potentially increase trading costs and discourage some activity.
• Regulatory Landscape: This development signifies a potential shift in how Nigeria approaches cryptocurrency. The government may be moving towards a more comprehensive tax regime for digital assets, building on the 10% tax on crypto profits introduced in the 2022 Finance Act.
• Unanswered Questions: While KuCoin has clarified its stance, it remains unclear if Binance will follow suit or challenge the FIRS’s demands. Additionally, the full details of the government’s crypto tax strategy are yet to be officially released.

Looking Ahead:

The imposition of VAT on crypto transactions is a significant step for Nigeria. It indicates the government’s growing recognition of the crypto industry’s importance and its intention to generate revenue from it. Whether this approach stifles innovation or fosters a more regulated environment for crypto in Nigeria remains to be seen. The actions of other exchanges and the FIRS’s next steps will be crucial in shaping the future of cryptocurrency in the country.

Tags: Crypto, KuCoin, Binance, Nigeria, VAT, FIRS, CBN, KYC, BitCoin